ISAC to sell $1.3 billion of its student loan portfolio

Following up on a similar but smaller deal earlier this year, the Illinois Student Assistance Commission plans to sell about $1.3 billion worth of its student loan portfolio next month.

Adriana Colindres

By ADRIANA COLINDRES

STATE CAPITOL BUREAU

Following up on a similar but smaller deal earlier this year, the Illinois Student Assistance Commission plans to sell about $1.3 billion worth of its student loan portfolio next month.

ISAC Chairman Don McNeil said Friday that agency officials estimate the "premium" on the sale will be between 4 percent and 5 percent, which means ISAC would make between $52 million and $65 million. The winning bidder or bidders would pay the premium in addition to the $1.3 billion face value of the loans.

The affected borrowers, mostly people outside of Illinois, won't see an increase in interest rates as a result of the sale, McNeil said. As was the case in January when ISAC sold a $648 million chunk of its portfolio, a condition of the pending sale will prohibit the winning bidder from diminishing borrowers' benefits.

He said proceeds from the sale would go to the Monetary Award Program, which provides need-based grants for college tuition and fees; to state government's general revenue fund, which is basically its checkbook account, and to ISAC.

Part of the money from the January portfolio sale was used to fund the MAP-Plus program that was created last year and awards eligible college students up to $500. Still uncertain, McNeil said, is whether MAP-Plus will continue beyond the 2006-07 school year.

No employee layoffs are planned at ISAC as a result of the pending sale, McNeil said.

"That's not to say that there won't be changes in the staffing at the agency over time," he said. "We're constantly looking at making the agency more efficient."

Once the sale is completed, ISAC's remaining student loan portfolio will be worth about $1 billion, McNeil said.

In another development, ISAC is preparing to launch a new loan program for college seniors attending Illinois institutions.

The Capstone Loan is meant to help seniors who are nearing graduation but who have run out of other financial-aid options and "really need a financial boost to finish up," McNeil said.

Students taking out a Capstone loan will have up to 20 years to repay it. Loan terms include an interest rate that starts at 8 percent but can be lowered for some students, including those in lower-paying jobs such as teaching.

Also, loan incentives will be offered to students who live and work in Illinois after they graduate.

For the coming academic year, which will be Capstone's first, the loan will be available only to students at certain "pilot" schools. So far, the pilot schools are Western Illinois University in Macomb, Midstate College in Peoria and the University of Illinois at Chicago.

McNeil said the new program is part of an ongoing effort to make ISAC "more Illinois-centric."

"The long-term goal that I'd like to see is that any Illinois high school student who works hard enough to get into an Illinois school will be able to go there regardless of his or her financial situation," he said.

Adriana Colindres can be reached at 782-6292 or Adriana.colindres@sj-r.com